SACRAMENTO – City Manager Bob Deis, the first witness called Monday morning in a trail to determine Stockton's eligibility for bankruptcy protection, said under cross examination that he foresees asking voters to raise taxes.

Scott Smith

SACRAMENTO – City Manager Bob Deis, the first witness called Monday morning in a trail to determine Stockton's eligibility for bankruptcy protection, said under cross examination that he foresees asking voters to raise taxes.

In the last two weeks, Deis issued a memo to the City Council, saying he privately urged Mayor Anthony Silva to stop promoting a half-cent sales tax initiative to hire more than 100 new police officers while the city is in the full throes of bankruptcy.

Attorney Guy Neal, representing Assured Guaranty Corp., questioned Deis, who said he opposed Silva's tax proposal because it threatened to attract creditors' attention opposing the city's bid to enter bankruptcy and put the city's general fund at risk.

“I'm in favor of doing two things,” Deis said. “Funding a fair plan of adjustment and restoring public safety, all with the goal of making Stockton a viable city again.”

The city today launched a four-day trial with the goal of persuading U.S. Bankruptcy Judge Christopher Klein to grant the city bankruptcy protection, the first hurdle for Stockton to restructure its finances in the courts.

Once granted Chapter 9 protection, the city would next have to complete a plan of adjustment, restructuring millions of dollars in debt.

The trial began with opening statements by attorneys for the city and the creditors, Assured Guaranty and National Public Finance Guarantee Corp., two firms that stand to lose millions in bonds the city issued and last year stopped repaying.

Stockton's lead bankruptcy attorney Marc Levinson said Stockton on June 28, when it filed Chapter 9, had already cut its police force by 25 percent, the fire department by 30 percent and other non-public safety city departments by 43 percent.

Bankruptcy was the only option, Levinson said.

Attorneys for the creditors said in their opening statements that the city never asked residents to raise taxes. Deis and other city leaders were dead-set on making the investors pay from the moment they considered bankruptcy.

The California Public Employees' Retirement System (CalPERS), which manages the city's employee pensions, was conspicuously left out of the city's plans, the creditors contend, arguing that the city didn't enter bankruptcy in good faith.

In questions from the Assured Guaranty attorney, Deis at times defended the city's budget line by line, especially decisions not to cut recreational activities and libraries. He took each question in stride, often smiling or asking the attorney to repeat questions he didn't understand.

The attorney asked why the City Council under his leadership continued to pay the $131,000 to put the council meetings on the local cable access channel. People in Stockton are often busy and one in four is illiterate, television is the best way to hold a transparent government, Deis said.